Dive Brief:

• Walmart Canada on Wednesday announced a plan to fulfill last-mile delivery of online grocery orders in the Vancouver area through a partnership with Sustainable Produce Urban Delivery (SPUD), which runs the food warehouse and delivery platform Food-X Urban Delivery, according to a press release from the companies. 

• Food-X is about to complete construction of a 74,000-square-foot warehouse, which will be added to operations within SPUD's existing facilities, according to the release. The warehouse is part of SPUD's broader logistics system that includes home delivery, small store retail, commissary/food preparation services and distribution

• Walmart Canada plans to make use of those services beginning this summer, allowing customers to shop online for fresh groceries, including fruits and vegetables, meats, dairy, baked goods, deli and frozen foods. According to the release, a Food-X truck would deliver orders as early as the next day.

Dive Insight:

Walmart and SPUD operate "two very different retail models," according to Stewart Samuel, Program Director, at IGD Canada, but this tie-up serves both companies' longer term aims. The partnership allows SPUD more efficiencies in its ongoing warehousing and delivery operations, and Walmart is able to serve a more urban area, where it operates fewer physical locations, he said in a blog post.

Walmart Canada similarly partnered with Penguin Fresh in Toronto, with two co-branded pickup locations downtown for online grocery orders, according to Samuel. "They are an important route for Walmart in Canada as they don’t have many stores in the downtown areas, especially Toronto and Vancouver,” he told Retail Dive in an email.

Walmart has a vast physical footprint, in both the U.S. and Canada, but not so much in more density populated centers, a legacy of its roots as a physical retailer bringing name-brand goods to rural areas. So far, as it builds up its lagging e-commerce sales, the retail giant has relied on its Jet banner to play in bigger cities, serving the younger, wealthier customers there, as CEO Doug McMillon noted on a conference call this week. Yet when it comes to e-commerce, especially in grocery, urban penetration is key, because of those consumers' expectations and the possibilities in delivery.

This week Walmart pointed to a drop in e-commerce growth during the fourth quarter. To help remedy that, Walmart must do more work to reach urban customers, who "do not associate Walmart with online, or they default to Amazon," GlobalData Retail Managing Director Neil Saunders said in a note at the time of the earnings release.

"This is a tough nut for Walmart to crack, and one that it can only break by more heavily marketing its services and proposition," he said.